Housing Price Volatility, Monetary Policy and China’s Economic Fluctuation
|School||Huazhong University of Science and Technology|
|Keywords||Housing Price Volatility Monetary Policy Economic Fluctuation|
This dissertation researches on the relationship among housing price volatility, monetary policy and China’s economic fluctuation with the method combines theoretic studies and empirical studies. With this purpose, this dissertation constructs a Keynesian Dynamic Stochastic General Equilibrium model which contains two parts:real estate market and normal consumption goods, then calibrates this model with the structural parameters from domestic and international theoretic and empirical researches on China’s economy. Based on the correction this paper analyzes the impact of exogenous technology shock, preference shock, monetary policy shock and one-time housing price plus shock on normal consumption goods production, housing production, money inflation, housing price inflation, real wage and unemployment parameters. It is found that compared with technology shock and preference shock, the impact of monetary policy shock and one-time housing price plus shock on the main macroeconomic parameters such as production. employment, money inflation and housing inflation is much greater and longer. This conclusion means monetary policy may be important to stabilize real estate price, and the government could choose the very right monetary policy to stabilize housing price, then macro-economy; the government could control housing price plus to restrain real estate market irrational exuberance, furthermore to achieve the goal of stabilize the real estate market and macro-economy; and housing price plus based on real estate market monopoly power, therefore this means depress the real estate market monopoly power could help housing price stabilization, and stabilize macro-economy.With the analysis on the transmission mechanism from exogenous shock to housing price, monetary policy and macroeconomic stabilization parameters, this paper uses multivariate ARCH model and multivariate GARCH model to analyzes the features and the interactive relationship among real housing price fluctuation, broad money supply growth rate and business cycle fluctuation. And the real estate transaction index has a good interactive relationship with the three parameters above.In order to better understand the shocking effect that the exogenous shocks give to China real housing price volatility, economic growth rate fluctuation (business cycle) and the broad money supply growth rate, a tri-variate vector regression model is constructed, and exogenous shock impulse response function and variance decomposition are solved. The result of the study finds out that real estate market price index shock struggle against China’s economic growth, and broad money supply growth shock impact to China’s economy growth is less significant, broad money supply growth rate shock obviously promotes real estate market price index to rise.Due to the defects of the vector regression model and monetary policy transmission mechanism, the bayesian method is adopted in this dissertation to reestimate the vector regression model. The result shows bayesian impulse response function of this bayesian vector regression model reflects that the interactive mechanism among the variables are different from vector regression model, the reason is that the bayesian method treats monetary policy decision-making process as a "bayesian decision-making process".Above the theoretical model research and empirical estimation, this dissertation argues that China’s sustained loose monetary policy causes housing price rising, which would lead to economic growth fluctuation and may even more block China’s sustained economic growth in the future. Based on this analysis, this dissertation believe that reforming institution, reducing real estate market monopoly power, improving real estate market supervision laws and regulations, imposing high management fees on vacant houses, converting concepts to insist the policy of real estate market regulation and making monetary policies pegging to inflation strictly to stabilize money supply, to achieve the stability of housing price or control it to a adoptable level. All of this will be benefit to stabilize China’s economy and obtain sustainable economic growth.